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  • Landlords to capitalise on new program to slash building energy use

Landlords to capitalise on new program to slash building energy use

14 March 2016
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​ Adelaide, 14 March 2016 – South Australia’s new Building Upgrade Finance (BUF) program is on the radar of some of Adelaide’s most prominent landlords, potentially paving the way for a swathe of projects designed to slash building energy use.

CBRE will tomorrow host a special client function to outline the advantages of the new legislation, which aims to remove the financial hurdles for owners seeking to institute environmental upgrade programs.

Eureka Environmental Upgrade Finance will be the keynote speaker at the function to outline the work they have undertaken for landlords in New South Wales and Victoria since similar legislation was introduced.

The BUF program was legislated state-wide by the South Australian Government on December 10, 2015 in a bid to reduce carbon emissions.

It encourages building owners to perform environmental works via an incentive scheme, whereby the costs are funded through tenant outgoings in the form of a council levy which is returned to the financier. The offset for the tenant is significant energy savings and considerably lower electricity bills.

CBRE’s South Australian Managing Director Alistair Laycock said the BUF legislation had sparked considerable interest among the firm’s major property management clients.

“It’s particularly appealing to the owners of secondary assets, giving them an opportunity to institute much needed environmental upgrades without bearing a significant financial burden,” Mr Laycock said.

“It’s far more appealing that using traditional debt as the energy savings themselves can be used to pay back the finance. For tenants, it also provides the opportunity to occupy more environmentally sustainable premises – something that is becoming a significant focus for major corporates in particular as they look at ways to attract and retain key talent.”

He expects there to be particularly strong interest in Adelaide given the high percentage of heritage buildings in the CBRE in need of environmental upgrades.

Eureka Environmental Upgrade Finance already has significant experience with similar programs in New South Wales and Victoria through its Environmental Upgrade Fund, which it established in a venture with Clean Energy Finance Corporation.

Projects have included a $26.5 million environmental upgrade agreement that formed part of the $2 billion redevelopment of the former Carlton & United Breweries site at Central Park in Sydney. Signed in 2013, it was the first such agreement for the City of Sydney, giving residents and businesses at the project to access low-carbon emissions power, heating and cooling via the installation of a trigeneration plant.

The installation is expected to save 190,000 tonnes of greenhouse gas emissions over 25 years

Eureka Director Quentin Shaw said the fund had lent over $40 million to building owners to kick start energy reduction programs, which was then paid back over a 10 year period via the council rate mechanism.

He expects there to be particularly strong interest in Adelaide given the high percentage of heritage buildings in the CBRE

“When a building owner performs environmental works it is usually the tenants that financially benefit through reduced energy bills,” Mr Shaw said.

“BUF addresses this split incentive issue by allowing building owners to utilising the tenant energy savings to fund the upgrade programs.  It makes economic sense and it also delivers true benefits to tenants, by way of lifting building performance and reducing energy use by as much as 60%.”

The legislation also ensures the amount of money recouped from the tenant does not exceed the savings in energy bills the tenant receives from the upgraded systems.

“This legislation allows everyone to win. The tenants pay the same or less in outgoings than they currently do but in a building which is more efficient and productive to work in,” Mr Shaw said.

South Australian Minister for Sustainability, Environment and Conservation Ian Hunter added; “The building upgrade finance mechanism is an important component in achieving our ambition of making Adelaide the world’s first carbon neutral city. It will unlock investment by overcoming current market barriers, create jobs and deliver savings to commercial tenants and landlords, while revitalising ageing building stock and delivering greenhouse gas abatement.”

Tomorrow’s event is the latest environmental initiative by CBRE, whose national Sustainability team is recognised as a market leader in providing sustainability services to clients.

 
 

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